VALENCIA COUNTY

News-Bulletin

y e n rs o e M att M

August 20, 2011

2 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

Getting your household budget under control is a first step

By Tiffini PorTer
News-Bulletin Staff Writer tporter@news-bulletin.com Its like a curse word. The mere mention of it is enough to send some people running and screaming into another room. Budget. OK, come back. A budget isnt that bad. The fact of the matter is that everyone is being affected by the slow economy and things such as budgets and spending plans are becoming more necessary and prevalent, even among those who swore to never have to live by them. But fortunately, a household budget is simple to create and can really make a difference in the quality of life for someone using it. Following a budget can eliminate the stress of living paycheck to paycheck and wondering how to pay the seemingly endless stack of bills piling up on the not-yetpaid-for kitchen table. There are really five reasons why a household budget can benefit a family, said Anne-Marie Wilson, the home economics agent at the New Mexico State University Valencia County Extension Office. Finances are the No. 1 source of fighting between couples, and (a budget) helps to reduce stress on a family. Also, when you have a budget, it helps you to know exactly where your money is going. We spend money left and right, but dont pay attention to where it is all going. When you develop a budget, it can help you to start a savings, which will obviously help with down payments on a house or vehicle, or emergencies, she added. It also helps teach children financial responsibility. When the family lives on a budget, it helps kids learn that they have to wait in order to purchase things. And the last thing a budget can help with is to reduce the debt within your home. The NMSU Extension Office has several online worksheets and guides available to walk you through every phase of planning and sticking to a household budget. The links can be found at www. aces.nmsu.edu and are available to print and use at your convenience. The topics range from starting a budget to rating yourself on your progress as a money manager, and can be found by clicking on eBooks in the menu on the left side of the page. The online resources are easy to find and easy to read, Wilson said. All the information offered through the extension office and the online resources are all research based. The majority of them are written by specialists in that particular area. A few simple steps can get you started on creating and maintaining a household

Basic Spending Guidelines

Housing (including utlities, taxes and maintenance) Food Transportation (including insurance) Clothing and Services Health Care (including insurance) Entertainment Savings (including retirement) All other expenses
budget that will work for you and your family. For more in-depth instructions or information, head to the website mentioned above. The first and most important thing to do is to decide on your spending goals, since these are your long-term plans and are the things most likely to benefit from your staying on track. Things like a family vacation, special events or even new appliances can be a part of this list. Be sure to write down exactly what you want, ideas on how to get it, and a date by which you want to meet each goal. The next step is to determine how much money you actually have and where it comes from each month. Dont forget to include all sources, from jobs to child support or food stamps. All income has to be

31.8-35 percent 15.6-20 percent 17-19 percent 5-7 percent 5-9 percent 3-6 percent 2-10 percent 7-12 percent

accounted for or your spending plan wont accurately reflect your life. The next, and probably most difficult, step is to list all of your expenses. This one can be tough if you are not accustomed to accounting for all of your spending each month. It is best to do this slowly, over a few months, in order to get an accurate picture of your spending habits. Keep receipts and cancelled checks if that helps. Amounts dont have to be down to the penny, just be careful not to forget any purchases, and remember to factor in some money for the inevitable unexpected expense. Then, compare your spending habits to your income. This will likely be the light bulb moment, when the realization hits that

there is a definite need for a household budget. Setting up a household budget can be as simple or complex as you would like to make it. There can be any number of categories in your budget, but make sure to include the biggest expense categories such as housing, transportation and food. Smaller categories can include things such as savings, clothing, recreation, gifts and donations. Be sure to designate fixed expenses from more flexible ones in the budget. There is more than one way to manage your money once you have determined where it comes from and where it goes each month. One way is to track your income and expenses in a notebook or computer program. At the beginning of each month, make a table with Income on one side and Expenses on the other. List all your expected income for the month and all the budget categories where you expect to spend money. Write down the dollar amount you expect to spend in each category. Throughout the month, keep track of all your expenses and deduct them from the proper categories as the month goes by. If you over spend in one area, try to cut down in another to stay within the income you have listed. Another option is to work with cash. When you get your income for the month, physically divide the cash into labeled

n See Budget, Page 7

August 20, 2011 Valencia County News-Bulletin Money Matters 2011 3

4 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

Thrifty is trendy and couponing is cool while saving money

By Tiffini PorTer
News-Bulletin Staff Writer tporter@news-bulletin.com

A little bargain hunting can go a long way. With television shows dedicated solely to watching people purchase thousands of dollars worth of groceries for $1.99 getting more and more popular, savvy shopping is quickly becoming chic. Although not everyone can manage to dedicate 40-plus hours a week to list making and coupon clipping, most shoppers can squeeze in enough time to save enough for at least another cup of iced coffee. Coupons are fast becoming a staple for many shoppers grocery trips, but even without the use of coupons, some smart shopping can save hundreds on a familys monthly grocery bill. Anne-Marie Wilson, the home economics agent at the New Mexico State University Valencia County Extension Office, said smart shopping can make a big impact on a familys budget. The extension office has some great resources for anyone interested in becoming a more mindful shopper, and can be found at www.aces.nmsu. edu or by stopping by the office at 404 Courthouse Rd. in Los Lunas. Wilson also said the extension office has a variety of classes offered through the ICAN program that can help shoppers make smarter buys and stretch their food dollars through smart preparation. Saving money on groceries may take a little time and planning, but the payoff will be well worth the work. Start by making an inventory of the foods already present in the kitchen or pantry. There is no need to buy more of something already in the home. Then, plan menus for the entire week. Try to make use of the items you listed in the inventory to shorten the shopping list even more. Make a shopping list for the remain-

ing necessary items on the menu, and follow it when shopping. Do your best to avoid the impulse buys that stores lure shoppers into purchasing. If it isnt on your list, it isnt needed this week. Comparison shop. Check the adver-

tisements for area grocery stores to be sure to get the best deals on the list of items. A worksheet provided by the Valencia County Extension Office points out that chain stores usually have the best deals and the widest variety of items, but dont

fall victim to the assumption that they are always the cheapest option. Shop alone and without distraction. Dont go to the grocery store rushed or hungry. This will help to avoid those impulse purchases and will allow time to comparison shop for specific items. When comparison shopping, pay attention to national brands versus store brands. The store brand is usually a better deal, but not always. Compare prices before buying prepackaged, prepared foods like cake mixes or frozen entrees. The price for convenience often isnt worth it. Buy the largest quantities available, they are usually the cheapest per unit. Be cautious when using coupons. There may be another brand that is still cheaper than the one on the coupon. Track each item and its price as it goes into the basket to avoid any problems at the register. Check the price of each item as it is scanned to be sure the register is charging the correct price for the item. For those ready to commit to the use of coupons, the savings can be even more substantial. Coupons are everywhere and are easy to get a hold of. Newspapers, magazines, circulars, and even the internet are full of coupons. Since most people do not have the time to devote unending hours to coupon clipping and organizing, the best bet is to search for coupons for the familys most used items and use those on weekly shopping trips to save a few dollars. Anyone who may be able to take the extra step of creating a list of coupons, complete with expiration dates and a list of stores where the items are on sale at a particular time can save hundreds of dollars on a weekly grocery trip. Be cautious though, if an item never gets used it isnt a good buy, even if it did cost little or nothing to purchase. A good place to get started with couponing is to visit a coupon site, n See Couponing, Page 5

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August 20, 2011 Valencia County News-Bulletin Money Matters 2011 5

from PAGE 4

Couponing: Shopping wisely

Be sure to check the stores policy before attempting to use multiple coupons as some stores have stricter coupon policies than others. Most stores coupon policies can be found online, posted in the store, or by calling the customer service department. Lastly, shoppers should be sure to organize the coupons in a way that makes sense to them. Some consumers sort their coupons into envelopes labeled with the area of the store they belong in, others use an accordion style folder to separate coupons by expiration date, and still others use transparent trading card sheets in three-ring binders in order to be able to quickly see a coupon during a shopping trip. Whichever method is chosen, shopping wisely and using coupons can drastically decrease a familys grocery bill, freeing up money in the budget for far more exciting purchases.

like www.coupons.com or www.couponmom.com, where the site will have lists of coupons, sales, and promotions relevant to several different metro areas (including Albuquerque). These sites will help a newcomer to the coupon world navigate through the vast array of available coupons and the best places to use them. There are even social media pages devoted to the coupon crazy, and can be extremely helpful when on the hunt for the best deals around. Consumers can like their favorite brands on Facebook to be among the first to find out about deals and promotions and following a company on Twitter is another way to be informed quickly when a deal is introduced. Another great tip is to look for and use multiple coupons whenever possible. By using two (or more) coupons on one item, the savings can add up quickly.

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6 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

Savings strategies such as IRA accounts are still available

By Jason W. Brooks
News-Bulletin Staff Writer jbrooks@news-bulletin.com

While many county residents have taken extreme or complicated financial measures to get through the past few years, some basic banking options are still utilized to save money. Some of those options are savings accounts and certificates of deposit. Edward Archuleta, a vice president with MyBank, said there are bank customers who still use savings accounts to help save for that rainy day. A lot fewer people are saving by traditional means these days, said Archuleta. At one point, some people were putting 10 percent of their payroll income into savings. Today, a lot of households cant do that. However, traditional accounts and other savings tools are still available for bank customers trying to buffer themselves against future financial adversity. Savings accounts, money market accounts, certificates of deposit and IRA accounts are just a few of the mechanisms that allow people to save money. Rates reflect risk, said Archuleta. More risk equals more reward, and some people are risk-adverse. There are still low-risk products out there. Archuleta said the loan side has changed considerably as the nations banking industry has witnessed bailouts, all sorts of dark economic news and re-shaping socio-political events. He said there are more consumer-protection regulations that have made it tougher for some customers to obtain credit, and savings tools are as much a part of credit and loans as ever. If you have a CD (certificate of deposit), you can borrow on it, he said. And a loan payment can be sort of a forced savings in itself, especially if you take out a loan at a low rate to pay something off quickly. Archuleta said savings account

Jason Brooks-News-Bulletin photo

EDWARD ARCHULETA, MyBank vice president, outlines savings tools.

interest rates have been near an all-time low for the past few years. However, these accounts have long been one of the safest ways to earn interest. Recent turmoil among the nations largest financial giants led to an increase in the federal insurance limit to $250,000. There is no doomsday period ahead in the forecast, says Archuleta. He thinks recovery for the national economy will happen just not quickly. Its going to be a slow road, he said. Nothing, really, is going to skyrocket. Thats why long-term savings plans are important, said Archuleta. CDs and

IRAs offer a chance to build wealth without lengthy commitments, and the customers money is tied up and unable to be used frivolously, he said. A money market account invests in government and corporate securities and pays dividends based on current interest rates in money markets. These accounts sometimes pay dividends higher than a savings account, so there is a slightly higher risk involved. Among nine major banks and credit unions with Valencia County branches, IRAs have some of the highest returns. The six-month IRA available to Sandia Laboratory Federal Credit Union mem-

bers has an annual percentage yield of 0.75 percent. Archuleta said the mistake some people make is to attempt to use up their savings to pay off a long list of creditors, rather than to make payments on primary debts such as home mortgages and vehicle loans. Some folks start getting all the phone calls from the credit card companies, and others that are owed money, said Archuleta. They panic, thinking one unhappy car or home loan person is better than 10 unhappy card compan See Savings, Page 7

August 20, 2011 Valencia County News-Bulletin Money Matters 2011 7

from PAGE 6

Savings: Economy

Savings rates
Savings account

nies, and sometimes savings gets used for all those debts. But your home loan is viewed as your No. 1 priority, and a lot of your credit rating revolves around your mortgage. Missing a house payment is something to use your savings to avoid, if you can. Vehicles are No. 2. Archuleta said homeowners are in the best shape if they can stay in their homes. If they have savings or other liquid assets, those should be used to do everything possible to keep from defaulting on a mortgage. In fact, if a homeowners mortgage situation is still afloat, but not promising, re-financing is one of the nontraditional means of saving money. Theres not a lot of talk about refinancing right now, Archuleta said. But your home loan can be your most valuable savings asset. If you qualify, you can get a low-price line of credit. Some of these tools can end up being tax-deductable. That doesnt mean housing prices wont continue to decline. Archuleta said hes heard about some properties falling as much as 50 percent in appraisal value. Real estate has always been kind of

In percentage points, lowest investment ranges used banks and credit unions with Valencia County branches as of Aug. 3, 2011
Money market savings or share certificate 6-month CD Shortest-term IRA

from PAGE 2

Budget: On track

Sandia Laboratory Federal C.U. MyBank Bank of Albuquerque Bank of the West U.S. Bank
(formerly First Community Bank)

0.5 0.15 0.1 0.05 0.05 0.10 0.04 1.0 0.50

0.55 0.45 0.15 0.1 0.05 0.05 0.15 not offered 0.15

0.75 0.4 0.1 0.05 0.05 0.30 0.15 not offered 0.7

0.75 0.6 0.1 0.05 (10-month) 0.05 0.30 0.15 1.0 0.7

N.M. Bank & Trust Wells Fargo Belen Railway Employees C.U. State Employees C.U.

volatile, said Archuleta. The vice president of one of the countys most visible banks says a lot of the talk about how banks havent been lending, or arent lending money given to them in federal bailouts, makes him angry. There seems to be an impression MyBank and other small New Mexico institutions are in the same boat with giant, worldwide financial entities, such as J.P. Morgan Chase and Citicorp. Most banks have a lot of money,

and they want to lend in out, he said. One of our recent goals was to lend $10 million in a 30-day span. But the credit requirements certainly arent what they were in 2006 or 2007. Archuleta said some of the nations biggest financial movers and shakers arent investing in new ventures right now, and the U.S. economy will really get rolling once that money starts to change hands. Right now, people with money are waiting, he said.

envelopes for each category where you expect to spend money. Then simply use the money in the corresponding envelope for whatever you have to buy or pay. You can always borrow from one envelope if there is not enough in another, but be sure to keep track of where the money is going or you may end up being short at the end of the month. After a couple of months, you should be able to see a pattern emerging. If you find that the expenses are continually more than the income, you will have to make some changes in the way to spend money. If there seems to be extra at the end of each month, make a savings plan instead of frivolously spending the overage. This will help you stay on track and reach your spending goals even sooner. The NMSU Extension Office is full of resources to help you on your way to becoming a better money manager, and is located at 404 Courthouse Rd. SE in Los Lunas. A lot of the programs we provide are free of charge so its easy for people to access, Wilson said. If there is a fee, it is very minimal, and we can pretty much answer any questions.

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8 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

Establishing credit early will help your score along the way
By Julia M. DenDinger
News-Bulletin Staff Writer jdendinger@news-bulletin.com

There are many milestones in a young persons life: Their first kiss, their first car, casting their first ballot and the first time they utter the words, Charge it. Anymore, its hard to get around in the world without some kind of credit, be it a lowly gas card with a $100 limit or a major credit card with thousands of dollars at your beck and call. So, just what is credit? The simple answer, according to Los Lunas mortgage banker Dee Tomlinson, is its a loan. Credit is money youre borrowing, Tomlinson said. That much is pretty basic. But where it gets tricky is knowing how you get credit and how and why you need to use it properly. One of the biggest outcomes of having credit, besides getting things now that you pay for later, is your credit score. Your credit score is a number that reflects your credit worthiness, Tomlinson said. That number shows how risky you are from an investment standpoint. They want to loan out money with the knowledge that they will get paid back. A persons credit score is determined by several factors, including how well you make monthly payments, how much of your lines of credit you are using and how old those lines of credit are. Of those, the most important is on time monthly payments, she said. A mistake young people make is thinking paying every other month is OK. Any time you are 30 days past due, you are damaging your credit score. Tomlinson said your credit score can mean the difference between being able to borrow $10,000 and $1,000. It also determines how much interest you are going to pay back on that loan. She gives an example of two people trying to borrow $100,000 to buy a house one with a credit score of 620 and the second with 720. Your score determines the cost of your credit. The difference in the interest rate can be as much as a full percent. It makes the difference of whether you pay 5 percent or 6 percent, Tomlinson said. Looking at a 30 year, $100,000 loan, an interest rate of 5 percent is a payment of $537 per month. At 6 percent its $600 per month. While that might only be a difference of $63 a month, over a year it can cost you another $756 or $22,680 over the life of the loan. A car loan, credit cards, they all use your credit score to determine your

Dee Tomlinson

Mortgage broker

interest rate, she said. Even some insurance companies have started looking at credit scores and basing their premiums and rates on that. So with the prospect of paying more for bad credit, why even have it at all one might ask. Tomlinson points out thats the way the world works now. Unless you have cash on hand to buy a house or a car, you need credit, she said. Banks are looking after their money and their best interest. They want to get paid back. But before you can even think about what your credit score is, you have to establish credit first. The good news is, everyone starts at the same place zero. Everyone starts at zero. You have no good credit. You have no bad credit, Tomlinson said. Zero is far better than bad. There are three main ways to establish credit, she said. One of the best is to apply for a line of credit at a local store or gas station. A lot of times, they will offer a small line of credit, she said. JC Penney is usually pretty easy to get and they start off low. The second best way is a secured line of credit. Basically, you open a savings and your line of credit is based on that balance. Its important to remember that banks report secured lines of credit to the credit bureaus, Tomlinson said. Another way to help a young person establish credit is to have a parent add them as a signer to their existing line of credit. That way, their history works in your favor, she said. If you are 16, Tomlinson said you can be added as a signer on a card or open your own line of credit. But at that age, the person is not liable for the charges the primary card holder is responsible.

Once a person hits 18, they can open a line of credit and be held responsible for the charges. And finding credit offers usually isnt a problem. Usually right after you turn 18, you will start getting offers in the mail, Tomlinson said. Thats soon enough to open a small line of credit. Start with one, start small and keep paid down. After a year or so, consider another line. Maybe a small car loan. Tomlinson said she has helped some 19- and 20-year-olds get into a home, but those were young people with a long work and credit history. Every case is different. It depends on the individual. Ive known some young people are very mature and have worked for several years, she said. But take small bites instead of stuffing your whole mouth full. If you are starting young, you have the chance to make mistakes and fix them before you need to really utilize that credit score on something large like a home or new car. While it doesnt contribute directly to your actual credit score, job history is part of the picture potential credit grantors look at. A good job history shows stability, especially with something like a home loan. They want to see a stable income from a regular, full time job, Tomlinson said. Most lenders prefer two years in the same line of work, but that doesnt mean you cant change jobs. They dont like to see you jumping from job to job to job. They dont like to see large gaps of unemployment. No consistent income diminishes the ability to make payments, she said. An exception to an employment gap is training for the job youre new at. That time in school counts as part

of your job history, Tomlinson said. If you change industries completely, lenders like to see stable income for a year. They want to know if you are on temporary or probationary status at the new job. If there are no gaps, no problem, they usually just want the first pay stub. A lender also analyzes your income versus your outgoing debt, Tomlinson said, especially for big loans. They make an assessment of how much you can afford to spend on something like a house or a car, she said. I see a lot of first-time buyers make the mistake of getting a car then the house. With a $500 car payment, now you can only afford $300 for a house payment and what can you get for that? Whether youre going for the whole enchilada and pursuing a mortgage or are just after a department store card, there are some things that will make any lender hesitant. Multiple inquiries in a short period of time send up a red flag that you are going out and approaching every Tom, Dick and Harry trying to get credit, Tomlinson said. When you shop for a loan, its important to have good credit because, otherwise, you wont qualify for a loan and if you do, it could double your interest rate. If you dont want to entangle yourself with credit and risk a bad score, Tomlinson said there are ways to obtain credit when the time is right for you. Its better to be at zero than have bad credit. In some instances, you can apply with whats called alternate credit. Its a years of on-time payments for things like utilities, rent and insurance, she said. You can usually get a letter saying that you have had 12 months of good payments. If you have a zero score, youre still building.

August 20, 2011 Valencia County News-Bulletin Money Matters 2011 9

Accounts reported to credit bureaus

Mortgage payments Bank loans Student loans Credit cards Car loans

Accounts not reported to credit bureaus

Rent payments Real estate contracts Private loans Utility payments Insurance

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Additional resources
U.S. Department of Housing and Urban Development www.hud.gov Annual Credit Report (This central site allows an individual to request a free credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.) www.annualcreditreport.com Credit Score Scale Guide (A personal blog with helpful credit information and tips.) www.creditscorescaleguide.com Dee Tomlinson, Los Lunas mortgage banker; dee.tomlinson@ gmos.us; 505-440-7536.
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10 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

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August 20, 2011 Valencia County News-Bulletin Money Matters 2011 11

Fixing your credit can take time, but is well worth it

By Julia M. DenDinger
News-Bulletin Staff Writer jdendinger@news-bulletin.com

Things can be fixed in any number of ways. From glue to duct tape to chewing gum and hope. But when things have gone badly for you in the world of credit there are really only two ways to make it better consistent repayments and time. There is no magic bullet. If you already have established credit, there are things you can do to make it better, said Los Lunas mortgage banker Dee Tomlinson. First, dont miss any payments. Late payments do not go away. Your credit score is a number that reflects your credit worthiness. It shows how risky you are from an investment standpoint. And if you are trying to improve your credit score, Tomlinson said a good rule of thumb is to keep balances on lines of credit under 50 percent of the maximum spending limit. Even better is to use it a little bit and pay off the balance every month, she said. Tomlinson said if you are trying to get a better credit score, dont open a lot of lines of credit at once. Lenders will be looking at how many lines of credit you have open. If you go out and get a car loan and a couple of credit cards, thats three brand new, unknown lines they dont know how you will handle, she said. And the loan for the car is 100 percent maxed from the get go. Conversely, if you have multiple lines of credit in bad shape, dont close them. It doesnt make anything better, Tomlinson said. If it was a problem account, the late payments have already been reported and those stay whether the line of credit is open or not. Its better to leave it at a zero balance and leave it as an open active account. In addition to late payments, non payments also ding your credit score and for years at a time, she said. Collections and charge-offs of accounts you dont pay stay on your credit report for seven years. And if a collection or charge-off goes to a judge for adjudication, and if its not challenged, the matter is settled in favor of the creditor. Judgements and tax liens stay on your credit report for 10 years, Tomlinson said. Even if you do pay a collection off, the credit agencies dont automatically correct their report. You have to provide documenta-

tion showing the debt has been totally satisfied. There is no credit fairy. And if you want to get a mortgage in the future, Tomlinson said, judgements and liens typically have to be cleared up beforehand. Theres no getting around it. When we pull a report, we can see the last 20 years, but were really only looking at the last two, she said. If something went to collection five years ago and there was no adjudication and no lien placed, then by all appearances, nobody is going to go after you. One thing that will stick with you to the bitter end is defaulting on student loans. Those never end. You wont be eligible for a federally backed loan like FHA and USDA, Tomlinson said. On student loans, dont take more than you think you can pay back. Try to avoid multiple student loans. You graduate, consolidate most of them, but if you miss one, youre late. Another thing that has recently started showing up on credit reports are child support payments that are late or in arrears, Tomlinson said. The state Child

Support Enforcement Bureau is reporting the delinquencies. Sometimes, people feel there is no coming back from their mistakes and consider bankruptcy. Tomlinson said a bankruptcy will affect your credit score for at least two years and depending on the type of credit or home loan program, it might count longer. She said consumers are eligible for an FHA loan two years after discharge, but conventional loans are four years out of reach. The key to reestablishing credit is consistent, on-time payments, Tomlinson said. If you continue to have a problem after a bankruptcy, its the kiss of death. With the economy still stumbling, Tomlinson said foreclosures are still an issue. She has strong advice for homeowners in foreclosure. Do not leave the home unless someone makes you. Make sure the mortgage company can prove they own your house, she said. There have been cases where it has been shown that homes were improperly foreclosed on. Dont walk away. People are giving up hope and there is always hope. So with that in mind, how do you go about fixing things? Tomlinson said, depending on the extent of the damage, there are a lot of repairs consumers can make themselves. The top three steps to take are pay down the balance, pay off any collections and make good, consistent monthly payments. Be very wary of people who claim they can fix your credit, Tomlinson said. Watch for companies that charge a high amount up front and a lock you into some kind of long-term agreement. Tomlinson said the more reputable companies will charge a small, monthly fee and not require a long term contract. There are a few good ones out there, but there are a lot of bad ones, she said, citing Continental Credit as one of the good ones. Some people think they can let their smaller debts lapse and save the money that should be going to payments for something big, such as a down payment on a house. Thats not the smart move, Tomlinson says. Its more important to have your credit paid down and collections paid off, she said. There are a lot of ways to get into a zero down program, but not a lot of ways to fix your credit once its gone south. n See Credit, Page 12

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12 Money Matters 2011 Valencia County News-Bulletin August 20, 2011

from PAGE 11

Credit: Tomlinson says identity theft can hurt your credit score
Once youve managed to pay off a line of credit, Tomlinson said to be sure and send a letter to the credit bureaus along with the pay-off statement showing the zero balance, asking for an update to your credit report. She said its best to send correspondence via certified mail. Its not going away, but it will show you have paid, she said. Tomlinson said when you write to the credit bureaus, be sure to include all of your information and the information about the account so they can compare it to what they have on file. If they cant validate that it is your debt, it has to be removed, she said. Consumers have a right to a free copy of their credit report from all three of the bureaus once a year. Tomlinson said anyone interested in obtaining and checking their credit report should visit www.annualcreditreport.com, which provides reports for all three different bureaus TransUnion, Equifax and Experian. If you find a mistake or need to correct something on your report, the address of the credit bureau is at the end of the credit report. And sometimes those mistakes arent yours. Sometimes your credit rating is hurt due to identity theft. Tomlinson said if you know your identity has been compromised, such as having your wallet or purse stolen, the first step is to cancel all your credit and bank cards. The second and equally as important step, is to make a police report. You will have to have one to show the credit bureaus it was identity theft, she said. Many times, with access to traditional lines of credit inaccessible, people will take out what Tomlinson calls loans of desperation. They are marked by high interest rates and no credit check requirements. That should be a red flag. Try not to operate from a position of desperation. It can go badly, she said. These companies do report to credit bureaus and its very easy to get caught up in the process and renew these loans. They are hard to get out. If you absolutely have no choice, do it once and never go back. Beware of no credit, no problem come-ons. Another avenue which isnt necessarily born of desperation, but should be trod with caution are reverse mortgages. A reverse mortgage is a loan that allows you to cash in the equity in your home for either a lump sum or monthly disbursements. Tomlinson says a homeowner has to have a lot of equity in the property and be over 62 to qualify for a reverse mortgage. There are no payments until you are no longer alive or no longer living in the home. If you die or move in with family or a nursing home, then your family has one year to refinance or sell the property or (the lender) takes it, she said. The payments are deferred and the balance goes up because its negative amortization. Each month, interest is calculated not only on the principal amount received by the borrower, but on the interest previously assessed to the loan. Because of this compound interest, the longer a senior has a reverse mortgage, the more likely it is that all of the home equity will be depleted when the loan becomes due. With the FHA-insured Home Equity Conversion Mortgage reverse mortgage, the borrower can never owe more than the value of the property and cannot pass on any debt from the reverse mortgage to any heirs. This is not a loan I recommend unless you cant pay bills or eat, Tomlinson said. Sometimes there are large, up-front cost. Be sure you understand the terms youre agreeing to. Visit www.hud.gov; it has more information on reverse mortgages. As a New Mexico licensed mortgage originator with 10 years of experience in Valencia County alone and now with Gateway Mortgage Group, Tomlinson isnt a credit counselor per se, but she has spent a lot of time helping people with their credit and assisting with credit repair. Im not sure New Mexico has what youd call licensed credit counselors, she said. I think my experience and sincerity sets me apart. When Im working with somebody, its not necessarily for the purpose of closing on a deal. A lot of people dont know their options. I try to educate them so they can make better credit decisions for the future, she said. I understand how it all fits together. I can give them a credit plan and show them the path to success. Sometimes it takes a while theyve lost their job, are behind on payments. So many people are in dire straits. Its my job to advocate for them.

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